Monday, January 17, 2011

JPM Q4 Earnings - Recap

Looking at JPM earnings I'm more confident in my short sided traded here.  Few key takeaways from the following table (may need to click on to be able to read it):

People talk about the rising yield curve as being positive for bank earnings but look at the ratio of interest income to interest expense.  The ratio is falling meaning every dollar spent on interest expense generates less interest income.  Interest income has also been flat the past few quarters and down substantially versus 1Q 10.  

Net interest revenue as portion of total net revenue is also playing a more diminishing role.

Notice the non interest expense both in dollars and as a percent of total revenue.  The trend is not friendly as it is growing as a percent of total revenue.  As the bank ramps up the expense associated with foreclosure this number will continue to grow both in real terms and as a percent of revenue.  

I can't seem to find a cash flow statement.  Will keep looking around.  I would imagine cash from operations has to be diminishing as a direct result of rising "real expenses" versus rising "FASB income."   If in fact true then can you honestly believe JPM will be ratcheting up the dividend?  Asset prices are falling last time I checked and JPM is showing $88 billion in second tier credits.


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